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Should You Buy Apple (AAPL) Stock Ahead of Earnings?
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Shares of Apple (AAPL - Free Report) dipped 1.7% during regular trading hours Friday in a sign that investors might be nervous about the iPhone giant ahead of its quarterly earnings release Tuesday. So let’s see what they should really expect from Apple’s fiscal Q3 financial results and assess if AAPL stock might be worth buying.
Overview
Apple turned into a global powerhouse on the back of the iPhone. These days investors are also excited about Apple because it has pushed into new growth areas after years of worry about its overreliance on its flagship smartphone.
Apple's Services unit is one of the company’s fastest growing and most important businesses. The Services division includes iTunes, AppleCare, Apple Pay, as well as the quickly growing Apple Music. Last quarter, Services revenues surged by 31% to hit $9.19 billion, making it Apple’s second-biggest revenue generator. Plus, it nearly outpaced iPad and Mac’s growth combined. Apple Music is already reportedly closing in on streaming music giant Spotify’s (SPOT - Free Report) U.S. subscriber totals, despite being a much newer platform.
CEO Tim Cook and Apple have also somewhat quietly prepared to make a streaming TV splash sometime in the next few years, which will see the company compete directly against the likes of Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , Hulu, and soon enough Disney (DIS - Free Report) . Meanwhile, Apple’s core iPhone business performed well last quarter, with revenues up 14% due to the higher price of the iPhone X. Overall, Apple’s Q2 revenues jumped by 16% to reach $61.14 billion, while its adjusted earnings surged 30%.
Price Movement
Shares of Apple have climbed roughly 55% over the last three years, which tops its industry’s 25% growth and the S&P 500’s 36%. Over the last two years, Apple has seen its stock price soar over 82%.
Apple stock was up roughly 28% during the past 12 months. Year to date, AAPL stock is up around 12%, which includes some pretty wild turbulence.
Valuation
AAPL stock is currently trading at 15.5X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to the S&P’s 17X and comes in just above its industry’s 14.5X. Apple has traded as high as 17.2X over the last year and as low as 13.2X, with a one-year median of 15.1X. Therefore, Apple’s valuation picture isn’t stretched based on where it has traded at over the last year.
Outlook
Apple’s fiscal third-quarter revenues are projected to climb by just over 15% to hit $52.37 billion, based on our current Zacks Consensus Estimate. Looking ahead to the full year, Apple’s top line is expected to expand by 13.5% from $229.23 billion to a mind-blowing $260.18 billion.
At the other end of the income statement, Apple is expected to see its adjusted Q3 earnings surge by 31% to hit $2.19 per share. For fiscal 2018, Apple’s earnings are projected to climb by 24% to hit $11.42 per share.
Earnings Revisions Trends
Moving on, Apple has received one upward earnings estimate revisions within the last 60 days for Q3, Q4, and its current fiscal year, against no downward changes. However, investors should note that Apple’s Most Accurate Estimate—the representation of the most recent analyst sentiment—is calling for earnings of $2.14 per share, which is five cents worse than our current consensus estimate.
With that said, Apple has a fantastic management team that has seen it miss quarterly earnings estimates just once in the last four years, including beats in the trailing eight periods.
We judge the price effect of these earnings beats by comparing the closing price of the stock two days before the report and two days after the report, and AAPL stock has turned positive in six out of these last eight windows—including a 6.8% surge following Q2’s earnings release.
Bottom Line
Apple is currently a Zacks Rank #2 (Buy) and sports an “A” grade for Value and a “B” for Growth in our Style Scores system. The company is also expected to expand both its top and bottom lines, while diving deeper into new growth areas like streaming.
Make sure to check back here for our full analysis of Apple’s actual fiscal Q3 results after market close on Tuesday!
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Should You Buy Apple (AAPL) Stock Ahead of Earnings?
Shares of Apple (AAPL - Free Report) dipped 1.7% during regular trading hours Friday in a sign that investors might be nervous about the iPhone giant ahead of its quarterly earnings release Tuesday. So let’s see what they should really expect from Apple’s fiscal Q3 financial results and assess if AAPL stock might be worth buying.
Overview
Apple turned into a global powerhouse on the back of the iPhone. These days investors are also excited about Apple because it has pushed into new growth areas after years of worry about its overreliance on its flagship smartphone.
Apple's Services unit is one of the company’s fastest growing and most important businesses. The Services division includes iTunes, AppleCare, Apple Pay, as well as the quickly growing Apple Music. Last quarter, Services revenues surged by 31% to hit $9.19 billion, making it Apple’s second-biggest revenue generator. Plus, it nearly outpaced iPad and Mac’s growth combined. Apple Music is already reportedly closing in on streaming music giant Spotify’s (SPOT - Free Report) U.S. subscriber totals, despite being a much newer platform.
CEO Tim Cook and Apple have also somewhat quietly prepared to make a streaming TV splash sometime in the next few years, which will see the company compete directly against the likes of Netflix (NFLX - Free Report) , Amazon (AMZN - Free Report) , Hulu, and soon enough Disney (DIS - Free Report) . Meanwhile, Apple’s core iPhone business performed well last quarter, with revenues up 14% due to the higher price of the iPhone X. Overall, Apple’s Q2 revenues jumped by 16% to reach $61.14 billion, while its adjusted earnings surged 30%.
Price Movement
Shares of Apple have climbed roughly 55% over the last three years, which tops its industry’s 25% growth and the S&P 500’s 36%. Over the last two years, Apple has seen its stock price soar over 82%.
Apple stock was up roughly 28% during the past 12 months. Year to date, AAPL stock is up around 12%, which includes some pretty wild turbulence.
Valuation
AAPL stock is currently trading at 15.5X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to the S&P’s 17X and comes in just above its industry’s 14.5X. Apple has traded as high as 17.2X over the last year and as low as 13.2X, with a one-year median of 15.1X. Therefore, Apple’s valuation picture isn’t stretched based on where it has traded at over the last year.
Outlook
Apple’s fiscal third-quarter revenues are projected to climb by just over 15% to hit $52.37 billion, based on our current Zacks Consensus Estimate. Looking ahead to the full year, Apple’s top line is expected to expand by 13.5% from $229.23 billion to a mind-blowing $260.18 billion.
At the other end of the income statement, Apple is expected to see its adjusted Q3 earnings surge by 31% to hit $2.19 per share. For fiscal 2018, Apple’s earnings are projected to climb by 24% to hit $11.42 per share.
Earnings Revisions Trends
Moving on, Apple has received one upward earnings estimate revisions within the last 60 days for Q3, Q4, and its current fiscal year, against no downward changes. However, investors should note that Apple’s Most Accurate Estimate—the representation of the most recent analyst sentiment—is calling for earnings of $2.14 per share, which is five cents worse than our current consensus estimate.
With that said, Apple has a fantastic management team that has seen it miss quarterly earnings estimates just once in the last four years, including beats in the trailing eight periods.
We judge the price effect of these earnings beats by comparing the closing price of the stock two days before the report and two days after the report, and AAPL stock has turned positive in six out of these last eight windows—including a 6.8% surge following Q2’s earnings release.
Bottom Line
Apple is currently a Zacks Rank #2 (Buy) and sports an “A” grade for Value and a “B” for Growth in our Style Scores system. The company is also expected to expand both its top and bottom lines, while diving deeper into new growth areas like streaming.
Make sure to check back here for our full analysis of Apple’s actual fiscal Q3 results after market close on Tuesday!
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>